| Author Name | KAWAGUCHI Daiji (Faculty Fellow, RIETI) /MORI Yuko (Japan Society for the Promotion of Science (JSPC)) |
|---|---|
| Creation Date/NO. | March 2013 13-J-009 |
| Research Project | Reform of Labor Market Institutions |
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Abstract
In this paper, we empirically examine the impact of the large increase in regional minimum wages in Japan following the revision of the Minimum Wage Law in 2007. The estimation results show that while the minimum wage hike increased the lower level wages among teenagers, it also decreased their employment. Specifically, an increase in minimum wages by 10% is associated with a 5.25 percentage point decrease in the employment rate of 16-19 year-olds. Given that the average employment rate of this group during the observation period was around 17%, this represent a decrease in employment by around 30%, implying an employment elasticity of the minimum wage of approximately 3.
